For all you people who believe in conspiracy theories and how the world is ruled by a secret organization made up of the rich and powerful:
Investopedia has a great article on how to link the Golden Ratio (the ratio 1.618 with finance): Golden Ratio
Imagine if all of stocks was ruled by this single number
You may ask what is the golden ratio?
It's a ratio that occurs very frequently in nature and architecture (from pine cones to bees...), see the source of all knowledge for more info: Wikipedia
Even though I find that the article goes too much in the technical analysis of stocks, I find you can still make use of the golden ratio
For instance, you should hold a stock until you have made a 61,8% return on it, then you can dump it.
Since the golden ration and the Fibonacci sequence are directly related, you can use the Fibonacci sequence: 1,1,2,3,5,8,13…in investing (the last number is always the sum of the two previous numbers in the Fibonacci sequence)
For instance, if you want to diversify, you can take 1,1,2,3,5, add them up, it makes 12.
Now invest in money markets to the tune of 5/12 of your investment portfolio.
Then 3/12 of your portfolio should be invested in stocks/mutual funds, 2/12 in bonds. 1/12 in treasury bills, and another 1/12 in gold
You can mix and match depending on how much of a risk taker you are (if you are young and willing to gamble, then I would put 5/12 in stocks while 1/12 in money markets…)
P.S.: You owe me 1/12th of all your winnings using my method
Disclaimer: However, I am not responsible for any losses. :)